Your Apartment Building Is Made Of Steel — And Trump's Trade Plans Could Mean Higher Rent

Trump has imposed 25% tariffs on steel, which is key to the construction of mid- and high-rise residential buildings.

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• Trump's 25% steel tariffs could drive apartment rents and condo prices even higher.
• Higher-rise buildings that require more steel are expected to see inflated construction costs.
• Developers may delay projects, hoping for stable prices, amid a severe housing shortage.

The US is facing a looming apartment crunch, and President Donald Trump's newly unveiled 25% steel and aluminum tariffs will likely inflate already elevated construction costs and raise rents.

Mid- and high-rise apartment and condo construction require more steel in their framing and foundation and will likely be more impacted by the tariffs than single-family homes and other low-density construction, which tend to be wood-framed, said Omar Rihani, executive vice president at Project Management Advisors, a real-estate development consulting firm.

"As you go up above five stories, and then you transition from wood construction to concrete construction, now you're going to have a lot more steel per square foot," he said.

Apartment construction boomed a couple of years ago amid surging demand and low interest rates. Landlords handed out free parking, signing deals, and other perks. But that's coming to an end. Multifamily construction starts already dropped to their lowest level in more than a decade last year.

Stubbornly high interest rates, a glut of higher-end apartments in many markets, and higher labor and other building costs have made building new units far less attractive to developers — and restrictive trade policies on building materials could worsen the trend. This means rents have nowhere to go but up.

Pricier steel could slow construction and raise rents

It's unclear exactly how much the tariffs, set to go into effect on all countries on March 12, will increase the price of steel in the US. Rihani predicts costs could increase in the low single digits for high-rise construction. Developers will ultimately pass higher costs on to renters and condo buyers to the extent they can, Rihani said.

In some cases, developers may choose to delay construction and wait to see if domestic steel production rises and prices stabilize. However, delaying a project is very costly, as property taxes, insurance, and interest still need to be paid. Some projects could be scrapped altogether or not pursued in the first place.

David Steinbach, global chief investment officer at the real-estate investment manager Hines, is more optimistic that strong demand for homes will keep development moving.

"While tariffs may slow some projects, we believe demand drivers are still strong enough to drive development and acquisitions," Steinbach said in a statement to Business Insider.

We've been here before. In 2018, Trump imposed 25% tariffs on steel, though he later exempted Canada and Mexico from those taxes. Despite the exemptions, the tariffs raised the commodity price of steel and increased construction costs as a result. The levies were later removed by the Biden administration. Some in the industry believe the steel prices will be tempered by the temporary increase in domestic production that occurred in the US after Trump's 2018 tariffs.

"We view steel as a medium-level risk construction material given tariffs from the President's first term had already provided significant demand for steel back to the US over the past decade," Steinbach said.

However, any increase in construction costs could hamper the effort to address the country's housing shortage and bring down costs for homebuyers and renters.

"We need to continue to build housing, and anything that holds back the creation of housing, in the long run, is not good for our nation," said Jay Lybik, director of multifamily analytics at real estate analytics firm CoStar.

A broader tariff environment

Earlier this month, Trump imposed 10% tariffs on China, which are already raising construction costs, some homebuilders report.

Meanwhile, tariffs on other key construction materials are also possible. Trump has threatened to impose 25% tariffs on Canada and Mexico, which would raise the prices of widely used building materials like Canadian lumber and Mexican gypsum used for drywall. There are also the expected downstream impacts of tariffs increasing broader inflation and keeping interest rates higher for longer, which will further raise costs for homebuilders and consumers.

The homebuilding industry urged Trump to reverse course. The National Association of Homebuilders sent a letter to Trump in January requesting he exempt "critical construction materials" from his tariffs. The major industry group has since condemned the president's metal tariffs as running counter to his pledge to bring down housing costs.

"Through an executive order on his first day in office, President Trump made it a top priority to reduce housing costs and increase housing supply to ease the nation's housing affordability crisis," the NAHB said in a statement to Business Insider. "His move to impose 25% tariffs on all steel and aluminum products imports into the U.S. runs totally counter to this goal by raising home building costs."

Even if Trump ends up coming to a deal with the US's North American partners and abandoning his proposed levies, the uncertainty surrounding his policy choices could inflate building material costs by disrupting supply chains and homebuilder timelines, even as the US struggles to build its way out of a severe housing shortage.

For now, developers are doing what they can to ensure the projects they already have in motion are protected from price hikes. Some of Rihani's developer clients are stockpiling lumber.

"Our clients are moving with a bit of urgency today, trying to get ahead of the tariffs," Rihani said. "They're looking at how do they lock in their pricing, lock in their projects, so that they mitigate future risk of tariffs."